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September 2008

Recent Trends in Discovery Against Tire Companies

ITEC Seminar, September, 2008

By Kenneth J. Moran

A. Introduction.
The last 10 to 15 years have witnessed some dramatic changes in litigation discovery, especially in product liability cases against tire manufacturers and the suppliers of other rubber products.  Pre-trial disclosures required by the Federal Rules of Civil Procedure and electronic discovery are among the most-widely discussed changes.  However, there have been much-less publicized undercurrents in discovery in these cases that have had equally dramatic effects.

Tire litigation no longer seems to involve traditional personal injury plaintiffs’ lawyers or “generalists.”  These attorneys have been replaced by a new breed of specialized plaintiffs’ lawyers who seek out tire cases, and announce this focus on their websites.  Recognizing the verdict potential in tire cases, these attorneys have formed a tightly-knit and cooperative practice group anxious to share information and strategies.  For this group, discovery is no longer a process leading to trial.  Rather, it has become an end-game in itself, where the ultimate goal is to obtain discovery sanctions against the tire defendant, thereby increasing the risk of a potential verdict and fostering settlement.  In other words, discovery has become the ultimate war and not just a battleground.

There are several hallmarks of this new era of discovery, including efforts to obtain trade secret information, the increased use of destructive product testing, the refusal to treat any information as confidential, and so forth.  Each of these plaintiff’s efforts is bound to raise the hackles of the tire defendant.

This paper will explore one of these new trends in product liability discovery:  the use of  confidentiality or protective orders to protect confidential information.

B. Sharing Versus Non-Sharing Protective Orders.
Discovery in product cases undoubtedly has become increasingly technical and complex as the underlying products themselves and their alleged defects have become equally complex.  It is not uncommon for the plaintiffs to request design and manufacturing specifications, manufacturing methodologies and processes, quality assurance procedures and data, testing data, product performance data, and other information in discovery.  The defendant manufacturing company has invested a considerable amount of research and development effort in generating these materials and approaches, and is concerned about its property being made available to competitors.  Therefore, these manufacturers often seek a protective or confidentiality order to limit, among other things, the use of the confidential material to the lawsuit in which it is being produced.  As one federal judge recently noted:

The propriety and desirability of protective orders securing the confidentiality of documents containing sensitive commercial information that are the subject of discovery in complex cases is too well-established to belabor here.  We are unaware of any case in the past half-dozen years of even a modicum of complexity where an umbrella protective order . . . has not been agreed to by the parties and approved by the court.  Protective orders have been used so frequently that a degree of standardization is appearing.

The federal rules allow the use of a protective order to limit the dissemination of “confidential” business or commercial information produced in discovery.   Most, if not all, states have a similar provision.  The orders typically provide for:

• The designation of certain information as “confidential,” while simultaneously imposing a “good faith basis” for making any such designation;
• Provisions for marking the documents, including deposition exhibits;
• Limiting the use of “confidential” documents to the litigation at hand;
• Limiting dissemination to a defined group of recipients;
• Returning the documents at the end of the litigation; and
• Vesting the court with jurisdiction to enforce the order.

Plaintiffs’ attorneys, who have an ethical responsibility to their clients, are anxious to obtain discovery and prosecute their client’s case to completion.  Therefore, they traditionally agree to the terms of a protective order, and that agreement often forms the “good cause” required under Fed. R. Civ. Pro. 26(c) or any state counterpart.

More recently, however, these same lawyers have begun to resist the notion that their use of protected information should be limited to the case at issue or that the information is even “confidential.”  Rather, they seek the ability to discuss or “share” confidential documents produced to them with other attorneys, experts or consultants involved in similar litigation.

The terms of the proposed sharing can differ broadly, from sharing with attorneys having filed cases against the same manufacturer allegedly involving the same product and failure mode to sharing documents and information with any lawyer with an actual or potential claim against the manufacturer (regardless of produce or type of failure).  Since it is unlikely that the defendant manufacturer or plaintiff will be able to agree on the scope or extent of any sharing provision, this decision ultimately will be determined by the court as it decides what order to enter.

There are many rationales behind the use of protective orders that the court might consider, including the harm that would befall the producing party without some protection, facilitating the flow of information in discovery, conserving judicial resources by permitting discovery to be attorney-driven, and so forth.  Thus, the terms of protective orders frequently are negotiated and agreed to by the parties, and entered by the court as “stipulated” orders.  On other occasions, the court considers competing terms of proposed orders suggested by the parties, and enters the order on its own volition, choosing the provisions that best suit the court.  In either event, it is becoming harder to reach agreement on certain terms like sharing provisions, confidentiality challenges and whether any type of protective order is available in a products case.

While the defendant tire manufacturer recognizes that its proprietary design, manufacturing and product performance information may be “relevant to the subject matter” of plaintiff’s claims and therefore discoverable, it seeks to limit the use and dissemination of this data to the lawsuit it is facing.  The plaintiff or receiving party, on the other hand, wants to share that information with other parties, attorneys and experts, and insists on a “sharing” protective order.  This impasse is further complicated by the laws in a number of states which prohibit non-sharing protective orders or otherwise restrict the scope of confidentiality orders.

From the tire company’s viewpoint, it has expended considerable sums in developing its proprietary materials and methodologies.  This information is the company’s “property,” and the company would suffer competitive harm if its competitor’s could obtain this information without a comparable investment.  The tire company also is concerned with public disclosure of this information and its use to create public concern about its products – either fairly or unfairly.  Finally, the defendant also wants to avoid additional litigation and empowering other attorneys to file suit.  Moreover, if the attorneys in other litigation need or want this information, they can use discovery in their own lawsuit to obtain it.

Conversely, proponents of sharing protective orders often point to the savings in judicial resources that can be anticipated if the information can be obtained without formal discovery.  As one court has noted:

The plaintiffs’ attorneys’ discovery information exchange group reduces the effort and expense inflicted on all parties, including Ford, by repetitive and unnecessary discovery.  In this era of ever expanding litigation expense, any means of minimizing discovery costs improves the accessibility and economy of justice. 

These attorneys also claim that sharing protective orders will help keep the defendant “honest” since the manufacturer will be facing a level playing field across the country. 

Some state legislatures have entered this fray.  In Virginia, for example:
A protective order issued to prevent disclosure of materials or information related to a personal injury action or action for wrongful death produced in discovery in any cause shall not prohibit an attorney from voluntarily sharing such materials or information with an attorney involved in a similar or related matter.

The reach of this statute remains cloudy as there have been no reported decisions applying or interpreting its terms.  The definition of “similar or related matter,” for instance, is still undefined, perhaps because a defendant can always attempt to avoid the statute by persuading the court that its information requires greater protection than that afforded by the statute’s provisions.

Even when plaintiffs’ counsel is unable to share confidential materials with his/her compatriots, he often seeks to accomplish that result in other (sometimes devious) ways.

C. Sunshine In Litigation.
Perhaps in response to reports of confidential settlement agreements in certain “high profile” litigation, a number of states have enacted Sunshine in Litigation acts (“SILA”) that limit the reach of protective orders where a “public hazard” is involved.  These SILAs restrict the trial court’s ability (or even the parties’ agreement) to enter orders regarding certain kinds of information that the public could use to protect itself for the harmful consequences of using “hazardous” products.

Earlier this year, for example, Nevada adopted a new rule for “sealing and redacting court records.”  Significantly, this rule only affects “court records” or documents filed with or maintained by the court in connection to a particular matter, and not the documents generally exchanged by the parties in the course of discovery.   This limitation can be important.  While “court records” may include some of the more sensitive documents which the manufacturer wishes to protect, the group generally is much smaller than all discovery exchanged by the litigators.  Nevada law now requires the court, which may hold a hearing, to specifically find that protection is not only “justified by identified compelling privacy or safety interests,” but that those interests outweigh the public’s interest in maintaining an open judicial system.  Furthermore, the law provides that “In no event may the sealing or redaction have the purpose or affect of concealing a public hazard.”

A more sweeping version of a SILA statute currently is being debated in the U.S. Senate.    While this bill contains many of the provisions of the Nevada rule or other state SILAs, it would apply to “information obtained through discovery,” and not just court records.  Again, the court would be required to find specifically that:

(T)he public interest in disclosure of potential health or safety hazards is outweighed by a specific and substantial interest in maintaining the confidentiality of the information or records in question.

before entering any protective order under Fed. R. Civ. Pro. 26 (c).  Since an already-burdened trial court is unlikely to conduct the necessary hearing, entertain the requisite evidence, or to otherwise engage in fact-finding, the proposed law may effectually undermine the use of protective orders in federal court.

These SILAs raise a number of disturbing Constitutional issues.  The U.S. Supreme Court has recognized that a company’s proprietary information amounts to the company’s property, and cannot be “taken” (publicly disclosed) without appropriate safeguards.  The Constitution, as well as notions of statutory construction, require that any law be relatively precise in its language to be applied fairly   Most SILAs treat the term “public hazard” and the point in time when it is determined rather loosely.  At the same time, however, every product liability lawsuit must allege that a product failed due to a defect, and resulted in injury (e.g., a public hazard) in order to survive even the most preliminary challenges.  Does the filing of a lawsuit, without more, define a public hazard; is a jury or court finding of a defect and “causation” required; since many products are regulated by either federal or state agencies, does an agency’s finding of a defect (or lack of a defect), trump an opposite “finding” by a jury; etc.

D. An Illustration of the Problem.
Many of these issues recently collided in Florida, a state with one of the most widely publicized SILAs.  Florida’s act also prohibits the entry of a protective order “which has the purpose or effect of concealing a public hazard . . ..”  That term is further defined as a product “that has caused and is likely to cause injury.”

In Jones v. Goodyear Tire & Rubber Co., a tire mechanic employed by the Dade County (Miami) Public Schools was injured when a Goodyear Unisteel truck “exploded” while he was checking it for leaks.  After a jury verdict in favor of the mechanic, the trial court decided that plaintiff’s expert should not have been permitted to testify.  Without that testimony, there was no evidence of a defect in the tire to support the jury’s verdict, and the court entered judgment for Goodyear.  Plaintiff appealed, asking the appellate court to reinstate the jury’s verdict. 

The appellate court in Miami not only reinstated the verdict, but vacated the protective order the trial court had entered over plaintiff’s objection to protect Goodyear’s discovery documents.  Apparently, while attempting to negotiate the terms of this order, plaintiff suggested that Goodyear submit the documents to the special discovery master who would review the documents in camera to determine their confidentiality.  Instead, Goodyear requested the trial court to enter an order protecting the documents.  Since the jury in Jones found the tire to be defective and to have caused plaintiff’s injury, the appellate court felt that finding triggered the SILA.  That, in turn, negated the protective order in the case.

Upon remand, Goodyear requested a hearing before the trial court, and asked the court to review the discovery documents in camera as required by Subsection 7 of the Act.  When the trial court declined, Goodyear sought appellate relief.  This time, the appellate court found that Goodyear had waived the Act’s requirements for in camera review since any error “was caused by Goodyear who obtained the benefit of a confidentiality order without a hearing.”

In a feat of ipse dixit, the appellate court rejected Goodyear’s Constitutional due-process arguments supposedly because the prior opinion “considered” and rejected the same challenges.  Moreover, ignoring the imprecise definitions under the Act, the appellate court found that the SILA sought to achieve a legitimate legislative interest.  Hence, the Act passed Constitutional muster, at least in substantive due-process terms.

Due to the ruling in Jones, Goodyear argued against a “blanket” protective order covering all materials produced in discovery in a subsequent Florida case in Pasco County (Tampa) (a different appellate district than Jones) Goodyear refused to produce any documents that had not been reviewed by the Court under the SILA beforehand   Nevertheless, the trial court refused this review and entered a protective order over Goodyear’s objection.  When Goodyear appealed, the appellate court, sided with the tire manufacturer, and further clouded the issues:

(W)hen the Sunshine in Litigation Act is raised, the possible existence of a public hazard can limit the use of confidentiality or protective orders.  Therefore, the possible existence of a public hazard must be determined up front (emphasis added).

Unlike in Jones, there had been no jury finding of a detect or causation in Schalmo.  Rather, the plaintiff merely alleged a public hazard, and the appellate court felt this was enough --
the mere “suggestion that the tires at issue constitute a ‘public hazard’” was sufficient to implicate the Act.  In an era of notice pleading, the court seems to permit plaintiffs, through their allegations and artful pleading, to determine whether protective orders will be entered in any product case.

It also is noteworthy that the Schalmo decision recognized the burden an in camera review of thousands of technical documents would have on the trial court at an early phase of the litigation.  At that point, it is unlikely that the court will fully appreciate the technical contents of the documents or the lawyer’s discussion of those documents.  Nonetheless, the appellate court felt compelled by the SILA to impose that burden, despite its “sympathy” with trial courts.

In contrast, the appellate court in Palm Beach County (West Palm Beach) recently approved a blanket protective order in a product (medical device) case, albeit with the addition of a broad sharing provision.  The court avoided any SILA issues by noting that O’Shea (the plaintiff) had not “invoked” the Act’s application to the dispute, and thus the court would not “extend our consideration to that issue . . .”  Arguably, Schalmo and Cordis reflect a difference among lower appellate courts that awaits resolution by the Florida Supreme Court. 

Overlooked in either opinion, however, is the question of reliance and the fairness of revoking/modifying a protective order that has been used to govern the defendant’s production of its confidential materials.  In other words, should a plaintiff be able to vacate the order after receipt of confidential documents?  That concern recently was addressed by the Missouri Supreme Court in State v. Ford Motor Co.,a products case where the decedent allegedly was killed in the rollover of a Ford Explorer.  During discovery, Ford produced a number of documents subject to a non-sharing protective order.  After settlement, the trial court vacated that order and replaced it with a sharing protective order.  The Supreme Court reversed:

In the present case, Ford’s reliance on the non-sharing protective order was manifest . . . It would be unreasonable to conclude that Ford would have insisted on this protection and allowed access to their (sic) company files if the non-sharing protective order was only to last until the settlement of the dispute.

Thus, the court found that Ford’s reliance outweighed any interest in facilitating discovery in similar matters:

The discovery process is primarily designed to facilitate an orderly and efficient resolution of individual lawsuits, not to provide a national database (of defendant’s documents).

E. Conclusion.
Civil discovery often seems to be dictated by “knee-jerk” reactions:  if one side objects to producing something, the other side immediately “wants it.”  If this is true, the future use of protective orders for proprietary business, technical or commercial information remains uncertain.  What is clear, however, is the certainty that the confidentiality of such information is under attack and requires vigilant protection.